Rewriting the retail book
June 2, 2003,
Attention. ATTENTION. A T T E N T I O N!
Your instructor...the godzilla from Bentonville, AR.
Subject...establishing a new profit center.
In a feature story last week, the Wall Street Journal detailed the workings of Wal-Mart in terms of how the retailer is coping with challenges to its sourcing channels in view of the SARS impact on travel.
While not explicitly stated in the article, it is implicit in the steps that Wal-Mart is taking that it has found yet another way to cut costs and throw the burden on financing this new process on its suppliers and others.
In contrast to past practices of sending its people to China for "sourcing summits," trips that the WSJ detailed averaged some 500 per year, its SARS-related alternative was to bring those folks here as well as to more effectively use technology such as e-mail and videoconferencing for preliminary steps like spec determination.
But, as always with Wal-Mart, there's a cost involved — for the other guys.
This time, it's bringing the suppliers to Dallas Apparel Mart showrooms but with a specific SARS twist. No supplier from China, Taiwan or Japan could meet with Wal-Mart buyers for 10 days after they landed here.
To this end, Wal-Mart supposedly spot-checked passports to make certain the 10-day prohibition was met. And of course the expenses for their airfare and stays in Dallas were picked up by the suppliers — certainly not Wal-Mart.
According to the Journal's account, this new procedure does a whole lot of stuff Wal-Mart probably hadn't thought of until now: Like saving travel expenses and time for their folks, condensing the process time by having it done in the United States, letting buyers compare notes (do buyers really do this, even at Wal-Mart?) and simulating store floors with the prospective new goods.
Yes, it looks like SARS is forcing everyone to look at sourcing differently. But leave it to the Bentonville Behemoth to figure out how to make it a profit center.
Folks, forget about reverse auctions, even the newcomer called 100 percent markdown dollars.
Welcome to the new retail profit center — sourcing.